NatWest has warned of cautious consumer spending and reduced hiring as it slashed its UK growth forecast because of the Iran war.
The lender expects the economy to grow by just 0.4 per cent this year, down from 1 per cent, as the outlook darkens amid the prolonged conflict, which has disrupted oil and gas supplies from the Middle East.
NatWest predicted that house prices would rise by just 0.7 per cent, down from 3.4 per cent.
Chief executive Paul Thwaite said spending on eating out has dropped as hard-pressed consumers are increasingly on the look-out for bargains in shops.
Concern: NatWest has warned of cautious consumer spending and reduced hiring as it slashed its UK growth forecast
The bank took a £140m impairment charge to account for the gloomier outlook.
And the lender revealed a £1.8billion fall in assets under management for the first quarter as the war sparked market turmoil – but Thwaite said it has since recovered from the hit.
Thwaite added: ‘Obviously the events of the last six weeks or so have made the environment more uncertain for customers and more uncertain for businesses. The near-term outlook is a bit more subdued given some of that uncertainty. We’re expecting slightly lower growth, higher inflation, and rates to stay at 3.75 per cent.
‘You can’t step away from the fact that confidence has been impacted. Spending on eating out has dropped off a little bit. There is some evidence around customers generally searching for value.’
Thwaite added that there had also been ‘a lot of acceleration of remortgage activity’ in March as borrowers race to lock in lower interest rates, a trend that seemed to be confirmed by separate Bank of England figures published yesterday.
He added: ‘That’s very proactive but very rational by customers. We saw some significant weeks of applications during March.’
He said among employers, especially manufacturers, there had been ‘a little bit more pause for thought around investment and hiring’.
The comments came a day after the Bank of England warned that a prolonged period of sky-high oil prices could send inflation soaring to 6.2 per cent – which could prompt it to respond with as many as six interest rate hikes.
NatWest reported a better-than-expected 12 per cent rise in profits to £2billion for the first quarter and said it expected income for the year to be at the ‘top end’ of its £17.2billion-£17.6billion guidance.
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